Oct 3, 2008

India - Ad Industry likely to be freed from Press Note 1

Mergers and acquisitions (M&As) involving foreign companies in the Indian advertisement industry would soon turn easier. The government is planning to exempt the advertisement industry from Press Note 1, which makes clearance from local partners mandatory for a foreign company to start a new business.The move would make mandatory no-objection certificates (NOCs) from joint venture partners redundant for new investments in the advertising industry. The government is keen to do this since there are various sub-sectors within the broad categorisation of advertisement industry and there is no clash of interest in several cases. The IT industry has already been exempted from Press Note 1. The government was earlier planning to do away with this requirement for all sectors, but a segment-by-segment approach is being adopted now since some departments did not back the idea of scrapping Press Note 1. Senior government officials said the department of industrial policy (DIPP) is considering the relaxation for advertisement companies, as its sub-sectors are independent of each other. For example, advertisement in the print media is considered to be different from advertisements in the television. Similarly, there are companies specialising in advertisements for radio or internet. Outdoor advertising is also considered a specialised segment even though it falls within the broad description of advertising. The Foreign Investment Promotion Board (FIPB) has discussed the issue, sources said. The DIPP has been asked to prepare a proposal for exempting advertising companies from Press Note 1 restriction and the issue is likely to considered soon, they added. Scrapping the requirement would boost foreign direct investment (FDI) in the advertisement sector and send the right signals, going a long way in attracting FDI in other segments as well. The move is part of a number of measures the government is planning to boost FDI in view of the challenges faced due to the financial sector crisis in the US. The government is also considering FDI in retailing of electronics and sports goods.